352.1153 St 2/13
The Chargé in Spain (Blair) to the Secretary of State
[Received December 28.]
Sir: Referring to the Embassy’s confidential despatch for the Secretary and Undersecretary, No. 654 of November 30, 1927, I have the honor to submit a further report in regard to the recent developments having to do with the petroleum monopoly in Spain.
On Thursday, December 1st, in the Embassy’s telegram No. 132, 2 p.m., the Ambassador reported that the petroleum monopoly had seized without compensation the Alicante works of Babel and Nervion, the Standard Oil of New Jersey subsidiary in Spain. This seizure was made under the provisions of several Royal Decrees establishing the monopoly and the Spanish text of the order of seizure together with the English translation thereof are enclosed herewith.
In the Embassy’s telegram abovementioned, the Ambassador stated that he had informed the Spanish Government that he was aware of the Order of seizure and that he must reserve all American rights in the premises. A short note, No. 389 of December 1st, was accordingly sent to the Spanish Minister of State drawing attention to the sudden and arbitrary seizure of property legally owned by American interests and I am enclosing herewith copies of the note [Page 701] sent. At this rather critical time, the Ambassador believed that by calling attention to the monopoly’s sudden and arbitrary action and at the same time again reserving all American rights, General Primo de Rivera, who is never familiar with the details of technical organization, might be brought to realize more forcibly the serious nature of the complications which had arisen and that Spain was not likely to obtain any compensating advantages.
The Embassy has, moreover, reason to believe that General Primo de Rivera is already rather worried and irritated by the trouble that the monopoly has caused him, particularly as he had been assured … that the whole thing would be put through easily and with no trouble. For this reason, it seemed possible that Primo, irritated by the diplomatic representations in regard to the maintenance of property rights made by several great powers, might conceivably either sweep away his subordinates and change his policy, or might at least give orders to pay off all foreign interests involved at a fair value, in order to avoid future difficulties.
The note in question was sent to the Spanish Government on Thursday evening and at the time of writing this despatch, no reply has been received. The Embassy has been informed, however, confidentially, that the note has already had a certain amount of effect as it has caused the Spanish Government to realize the difficulties of the position and that it has, moreover, had the effect of staying other seizures for the time being.
The seizure of the Alicante plant has been made in a curious manner and would seem to show that the monopoly is acting in a rather confused and badly directed way. (See Embassy’s confidential telegram No. 133 of Dec. 6, Noon). The monopoly officials, armed with Ministerial power, went to the plant, said that they only intended to use it temporarily for the storage of monopoly supplies and instructed the plant officials to take the necessary measures for unloading a part of a cargo. The local company officials made a formal protest before a notary and then conformed to orders. After the petroleum was unloaded, the monopoly officials informed the company that it would be responsible for the storage of the monopoly supplies until further orders and no offers whatsoever of compensation or insurance payments were made. The company again lodged formal protest.
This high-handed procedure has naturally placed the company in a very difficult position. It has, at least, avoided a danger which is, however, very likely to arise in the near future. The company feared that, as the plant might be taken over by the monopoly in its entirety without any valuation or proper inventory of the plant’s physical condition, its value might well deteriorate rapidly in inefficient hands and that, when a Valuation Commission finally arrived, the monopoly [Page 702] might state that any damages which had occurred was due to the condition of the plant before it had been taken over.
The Embassy will forward by the next pouch copies of the formal protests which the company had made at the time of the seizure of its Alicante installations.29
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In regard to the formal request for valuation and reimbursement which Babel and Nervion, the Standard Oil of New Jersey subsidiary addressed to the Minister of Finance, on December 5th,30 and which is referred to in the telegram abovementioned, No. 132 [135], I am unable to forward copies of this letter today owing to shortage of clerical staff. The summary of it which, however, is given in my telegram, will I believe, give the Department the essential facts which the company has brought forward and I will forward the text of the letter itself by the next pouch.
I have [etc.]